Question:
I’m buying a home for the first time, should I get a Personal Mortgage Insurance Policy that pays off my mortgage if something should happen to me?
Answer:
Personal Mortgage Insurance Policies
In most instances, personal mortgage insurance policies which pay off the balance of the mortgage on a home should the owner of the mortgage die can be covered by a life insurance policy. When setting up a life insurance policy, either whole life or term life, be sure to include the amount of the mortgage balance that you want to pay off.
Remember, as you pay into a mortgage, your balance in most cases goes down. If you are planning on paying into your mortgage for a longer period of time, you may want to target a slightly lower pay off figure to base your life insurance coverage on. This will keep your policy premium a little lower if you have a concern about monthly expenses. Check with your life insurance agent for your options regarding covering your mortgage with your life insurance policy.
Private Mortgage Insurance Is Not Personal Mortgage Insurance
There is another type of mortgage insurance that you need to be aware of. This type of mortgage insurance is not the same type of insurance as the type that we are talking about in this article. This other type of mortgage insurance is called Private Mortgage Insurance (PMI) or Mortgage Insurance Premium (MIP).
PMI is required by your mortgage lender if your first mortgage balance is greater than 80% of the home’s value. Loans guaranteed by Fannie Mae and Freddie Mac are the loans that require PMI. FHA requires MIP no matter what loan balance you have. More Information on What Is PMI and MIP?
